Individual flexibility arrangements - are you getting them right?

Human Resources expert Michael Cosgrove takes a closer look at flexibility arrangements and what terms you are obliged to offer your employees under the Fair Work Act

As part of the Award Modernisation process, it was identified that every Modern Award was to contain a “Flexibility Term”. The original intent was to enshrine a mechanism in the awards for employees to seek flexible working arrangements to allow for family responsibilities etc, or alternatively for them to seek flexibility in terms of the certain arrangements or conditions in the Awards or Enterprise Agreement.

Individual Flexibility Arrangements are not lodged with FWA, therefore they are not approved nor form part of the Enterprise Agreement. However, should an FWO inspector audit your business, the contents of the IFA are taken into consideration, and any breach of the legislation by the IFA would incur a penalty to the business, and possibly individual officers.

Michael Cosgrove

An IFA must not override, or in any way facilitate a breach of an Award condition. In doing so, the IFA would be rendered non-compliant, unenforceable by the employee, and expose the business to significant financial risk.

In order for an employee to request an arrangement they must display genuine reasons why they need the arrangement, plus display how they will be “better off”. Greater personal time is not a legitimate reason for an IFA.

Additionally, the business has the ability under the Legislation to terminate an IFA with 4 weeks written notice. It is required however that individuals circumstances in terms of Child Care commitments etc be taken into account before terminating any IFA. Although having the ability to withdraw the IFA is there, it is strongly advised that each IFA be taken on their own value and worked through in detail.

It is evident that small to medium businesses have struggled with the Fair Work Act and Modern Awards since their inception. IFA's in particular have alone caused significant impacts in terms of time in dealing with such requests, whilst trying to ensure they meet legislative requirements.

When an employee approaches you and requests to enter into an IFA, there is one key factor that must be the focus. Does the request in any way facilitate a breach of an Award or Enterprise Agreement provision?

An application was made for approval of the above agreement under the provisions of the Fair Work Act 2009. AMWU contested the application on the grounds that the Flexibility Term in the draft agreement did not comply with the provisions of the Act. Part of the Commissioners decision is detailed below:

The proper meaning of the Act:

"[42] What significance should be given to the phrase “the effect of which may be varied” appearing in both s.144(4)(a) and 203(2)(a) and the corresponding phrase “varying the effect of” appearing in both s.144(1) and 202(1)(a)?

[43] ʻEffectʼ as defined in the Macquarie Concise Dictionary 5th Ed means; “that which is produced by some agency or cause; a result; a consequence”.

[44] The case law on ʻthe effect ofʼ suggests that it is concerned with the result or consequence of the operation of the particular legislative provision.

[70] The plain language of s.202(1)(a) and 203(2)(a) do not permit the terms of an enterprise agreement to be varied, only the effect or consequences of those terms.

[80] The Act does not permit individual flexibility arrangements made under a flexibility term in either a modern award or an enterprise agreement to vary the terms of the modern

award or enterprise agreement.

[81] All that the Act permits and in fact requires is that the effect of the award or enterprise agreement terms may be varied by an individual flexibility arrangement."

Simply an IFA can not vary the terms/conditions contained within an Award Clause, it can only vary the effect it has on the overall conditions and the employee must be "better off overall". For example, varying the award provision to remove the meal break (term) would be considered a breach. However, varying the term to push out the timing of the meal break would be ok, as long as it was mutually agreed and documented in the IFA.

Flexibility can be achieved under the Fair Work Act. Employers can seek out employees and request, never coerce, to enter into IFA's, you just need to be creative, and compliant.